Without stripping out the effects, Japanese inflation is still at
2.9%, but the effect of the tax hike will drop off sharply in
April, a year after it was brought in.

Japanese two-year bonds
traded with negative yields in the aftermath of the news, a
first for the country. That indicates that investors are
expecting very little inflation or growth, so they're willing to
accept a small real-terms loss on their investment.

A bundle of other economic news was slightly more positive for
Japan: overall household spending dropped by 4% in the year to
October, less than analysts expected. The unemployment rate also
fell to 3.5%, a 16-year low. Industrial production rose 0.2%
month-on-month in October, and retail sales are up 1.4% from the
same month last year, both of which were better than economists
expected.